Bonds

The World Bank sold the equivalent of about $700 mln of a three-year of a multiple currency bond that duplicated the composition of the IMF's Special Drawing Right or SDR. There has been much fanfare. It is the first SDR bond in more than 30 years according to reports.

The climate summit in Paris has shown that global big business is now also on board with the transition to a low-carbon economy.

However, the most promising instruments in finance for promoting green investing, particularly green bonds, have been around for almost a decade now, starting with the European Investment Bank (EIB) Climate Awareness Bond in 2007.

Why haven’t green bonds entered the mainstream of finance, and what is holding them back?

This Great Graphic was composed on Bloomberg. It shows two time series. The yellow line shows the premium the US pays over Germany for two-year money. The white line shows the premium the US pays over Japan for two-year money.

US 10-year Treasury yield has risen 30 bp since Monday's low water mark. There are a number of reports that are trying to link the back up in US yields to sales by China. The Chinese sales, in turn, link to its efforts to stem the decline in the yuan.

China may indeed have sold Treasuries. Bill Gross at Janus apparently suggested this is the case in a tweet he sent earlier this week. Reporters have been keen to follow the lead. Some media accounts intimate that China had notified US officials of their intentions.

Several recent developments in the fixed income space are distinct from the prospect of higher rates in the US and UK, or the ongoing purchases by the BOJ, ECB, and Riksbank.

Corporates have raised 157 bln euros by issuing investment grade bonds. Some observers have suggested this will be the fuel that spurs a euro recovery. Repayment of the borrowing will have to happen, and it will require the purchase of euros.